‘AI will embolden fraud’ in auto finance, lenders say

AI could exacerbate already record-high auto finance fraud, prompting lenders to lean on real-time prevention tools and require greater scrutiny from dealer partners. Generative AI tools could accelerate the volume of auto finance fraud that lenders and dealers are exposed to, AutoNation Finance President Jeffrey Butler said during a panel session at the recent Auto Finance Summit East. “The thing that absolutely keeps me up at night is how AI will embolden fraud as we move forward.”— Jeffrey Butler, AutoNation Finance [caption id="attachment_58361732" align="alignnone" width="1362"] Jeffrey Butler, president of AutoNation Finance, speaks at Auto Finance Summit East. (Courtesy/AFN)[/caption] Auto lenders’ fraud-related losses totaled a record $10.4 billion in 2025 , according to an April 8 report from risk management provider Point Predictive . AI-generated paystubs used in fraudulent applications jumped by almost 500% between April and December 2025. AutoNation Finance and other lenders are embedding fraud prevention tools into their underwriting to identify risk within “seconds or minutes” of decisioning, Butler said. However, as fraud schemes become more complex and use borrowers with high credit scores , dealers must flag suspicious background information even if customers’ credit applications seem typical, he said. For example, one customer buying four vehicles at the same time from four lenders should trigger a closer look, even if the borrower passes prequalification checks, Butler said. “The [fraud prevention] models, as good as they are … they will fail.”— Jeffrey Butler, AutoNation Finance “We have to, as an industry, stand up and push back on the dealer and say, ‘We’re not going to allow this to happen in our business,’” he said. “The [fraud prevention] models, as good as they are … they will fail.” AutoNation Finance’s originations totaled $460 million in the first quarter, flat year over year, according to the company’s May 1 earnings release. The portfolio totaled $2.5 billion, up 68.5% YoY, in Q1. The captive was the 69th-largest auto lender by outstandings at yearend 2025, according to the latest Big Wheels ranking data . Auto lenders must ensure their real-time underwriting, fraud prevention tools and verification tools work in sync to accurately block fraud, Duane Freeman , senior vice president of client services at Bank of America , said during the session. “If you start to make simple mistakes, they can have profound impacts on your [profit and loss],” Freeman said. “The one that’s concerning is fraud. … It’s always evolving.” Fully automated transactions might be riper for fraud than physical dealership sales, in which a real person who can be tracked is involved in the transaction, he noted. Bank of America was the 11th-largest auto lender by outstandings at yearend 2025, according to Big Wheels. The bank’s indirect and direct consumer outstandings, primarily consisting of auto and specialty loans, fell by 0.4% year over year to $53.9 billion in the first quarter, according to its April 15 earnings supplement. AI versus AI While AI is increasing the industry’s exposure to fraud, AI tools could also drive fraud prevention, Capital One Head of Sales Joseph Portera said during the session. Lenders can train their machine-learning models on increasingly complex fraudulent transactions, making them more effective at preventing fraud, Portera said. And more data, he said, makes the tools more accurate. “If you have a wide enough net and a smart enough model or set of models … you get a very good read on whether this is a fraudulent transaction,” he said. As AI tools continue to improve and risk-management models absorb transactions “millions of times a day,” fraud risk could be eliminated entirely, Portera said. “My hope is that in the end game, you take fraud to near zero, because systems just get hardened so much that it’s almost impossible to do it,” he said. Capital One’s auto originations rose by 20.9% YoY in the first quarter, totaling $11.1 billion, according to the bank’s April 21 earnings supplement. The bank was the fifth-largest auto lender by outstandings at yearend 2025, according to Big Wheels. Find more coverage from Auto Finance Summit East 2026 here .

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‘AI will embolden fraud’ in auto finance, lenders say

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